Most Resales Are Bubble-Era Purchases

Posted by Dave Fratello on Wednesday, February 10th, 2010 at 4:20am.

Half of the active SFR listings west of Sepulveda are homes purchased in the 5 peak bubble years of 2003-2007.

Most of the resales are from that bubble period.

An analysis conducted by MBC of active SFR inventory as of Feb. 9, 2010, shows the following:
  • 20 active listings were purchased before 2003
  • 12 actives were new construction
  • 3 actives were purchased after 2007
That's a total of 35 listings that were not bubble-era acquisitions.

But a total of 35 other actives were purchased in the peak bubble era, or half of all the SFR listings. (Click on graph to expand.)

Looking at more routine resales separately, the bubble-era purchases dominate even more. We set aside the new construction and the 3 post-2007 acquisitions, which are all anomalies (one was rebuilt extensively and 2 are attempted flips).

Weighing only pre-2003 purchases against those made in the hottest 5 years of the local RE bubble, the bubble set makes up 64% of all current resale inventory.

Is it "normal" for almost 2/3rds of resale inventory to consist of homes purchased during a single 5-year period? Your blog author has no idea. This is not the way real estate markets are typically measured. Even a well-documented answer would probably boil down to "it depends."

It's beyond the scope of this post to explain any trends behind why these bubble-era buyers are getting out now. For some of them, the headline issues of the day are surely factors – job loss, loan problems, being-upside-down problems. But for others, you'll see some move-up buyers, mixed in with all the old standards – death, divorce, downsizing and job transfer. We just don't know the mix.

It's worth noting that 35 active listings emanating from all the sales during the 2003-2007 period represents a small percentage of all the homes traded during that time. These may have greater significance for the current market than as a sign of distress among bubble-era buyers as a group.

In fact, almost none of the active listings appear to be in default or bank-owned. According to a local "foreclosure" list posted the other day by Blake Roberts on his blog, we see just 2 bank-owned properties on offer (1026 Duncan and 617 6th), one with a fresh NOD (new construction at 529 18th) and one with a series of NODs and trustee's sale notices that just hit the MLS recently (3613 Pine).

There would be some distress for some of these bubble-buying sellers, though, even if they do make a deal.

As our chart here shows, almost half (16 of 35) of these bubble-era purchases now on the market are from 2006 and 2007, acquisition dates that almost always translate to a significant loss at closing.

For example, 2 recent sales (new escrows) in town, 3113 Laurel and 2603 Palm, were from 2007 and 2006, respectively. (They're not reflected on this chart, since they're not active listings.) Both pencil out to lose money.

With MB living in 2004 prices for now, 2005 purchases can't be expected to fare well upon sale, either.

Nearly a third (11 of 37) of these resales were purchased in 2003 and 2004, the 2 years for which there's some hope of recouping costs or, perhaps, making a little profit.

All 35 bubble-era acquisitions are listed below, by year of last sale (click any property address for more pics & details via Redfin):

217 Seaview
517 1st
622 Rosecrans
560 35th

2005 Acquisitions

913 Highview
1026 Duncan
923 8th
621 Valley
3408 Crest
3613 Pine
1724 Pine
616 29th

2006 Acquisitions

532 5th Pl
217 35th Pl
204 19th
2920 The Strand
629 MBB
672 19th
521 12th

2007 Acquisitions

123 44th
1516 Highland
4320 The Strand
937 27th
3305 Pine
706 Anderson
1018 2nd
420 1st
3104 Maple

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